Why Price and Volume Aren't Enough

Every retail trader stares at the same candlestick charts. The same green and red candles. The same volume bars. The same indicators derived from price.

And they all wonder why they keep losing to "the market."

Here's the thing: you're not losing to "the market." You're losing to people who see more than you do. Institutions, market makers, and sophisticated traders who have access to data you didn't even know existed.

This isn't a conspiracy. It's just reality. And understanding this reality is the first step to doing something about it.

Welcome to Level 2. This is where we start talking about data—the fuel that powers everything.

The Information Hierarchy

Think about what you see when you open a chart:

•Price (open, high, low, close)
•Volume
•Maybe some indicators (RSI, MACD, moving averages)

That's it. That's your entire view of the market.

Now think about what a trading desk at a major fund sees:

•Everything you see
•Real-time order flow across all major exchanges
•Liquidation levels and clusters
•Funding rates by exchange
•Open interest changes by timeframe
•Whale wallet movements
•Exchange inflow/outflow
•Options positioning and Greeks
•Sentiment data from social platforms
•On-chain metrics (for crypto)
•And proprietary data sources you've never heard of

This is the information hierarchy. And you're at the bottom of it.

When you're trading based on a candlestick pattern, someone else is trading based on the fact that $50 million in liquidations sits just below current price, funding is extremely negative, and whale wallets just moved coins off exchanges.

Who do you think wins that trade?

Why Price Is Always Late

Here's a fundamental truth that most traders never internalize: price is the last thing to move.

Price is the output, not the input. By the time price moves, something else already happened:

•A whale accumulated a position
•Liquidations cascaded
•Funding rates went extreme
•Order flow shifted
•Sentiment changed

If you're trading based on price, you're trading the effect, not the cause. You're reacting to what already happened instead of anticipating what's about to happen.

This is why price-based strategies have such low edge. You're always late. You're always seeing the market after the informed participants have already acted.

Volume is slightly better—it tells you something about conviction—but it's still just measuring what happened, not what's building.

The Derivatives Data Advantage

In crypto, the derivatives market is where the real information lives.

Why? Because the derivatives market is where leverage happens. And leverage creates forced actions.

When a trader opens a leveraged position, they're creating a future event: either they'll take profit, get stopped out, or get liquidated. These aren't possibilities. They're certainties. Every leveraged position will close somehow.

This means the derivatives market contains information about the future that the spot market doesn't.

Liquidation levels tell you where price is likely to be drawn. Large clusters of liquidations act like magnets. Market makers know where they are. You should too.

Funding rates tell you market sentiment and positioning. When funding is extremely positive, longs are paying shorts to stay in the trade. This means the market is overleveraged long—and overleveraged markets snap back.

Open interest tells you how much money is in the game. Rising OI with rising price means new money entering long. Rising OI with falling price means new money entering short. This context changes everything about how you interpret a move.

None of this shows up on your candlestick chart.

What Retail Traders Miss

Let me paint a picture of a typical retail trading loss.

Bitcoin is at $95,000. A trader sees a "support level" at $93,000 based on previous price action. They go long at $94,500 with a stop at $92,800.

What they don't see:

•There's $200 million in long liquidations clustered between $93,500 and $92,500
•Funding rates are highly positive (longs paying shorts)
•Open interest has been rising with price (lots of new longs)
•Whale wallets have been depositing to exchanges (preparing to sell)

What happens:

•Price dips below $93,500
•Liquidations start cascading
•The "support" at $93,000 evaporates as more stops get hit
•Price wicks to $92,000, liquidating our trader
•Price then reverses and goes to $98,000

From a price-only perspective, this looks like bad luck or "manipulation." From a data perspective, it was completely predictable. The liquidation cluster was visible. The overleveraged positioning was visible. The whale movements were visible.

The trader lost because they made a decision with 10% of the available information.

The Data Categories That Matter

So what data should you actually be looking at? Here's the hierarchy for crypto trading:

Tier 1: Derivatives Data

•Open interest (total and by exchange)
•Funding rates
•Liquidation levels and recent liquidations
•Long/short ratios

Tier 2: Order Flow Data

•Cumulative Volume Delta (CVD)
•Large trades / whale transactions
•Order book depth and changes
•Exchange-specific flow

Tier 3: On-Chain Data

•Exchange inflows/outflows
•Whale wallet movements
•Active addresses
•Network metrics

Tier 4: Sentiment Data

•Social media sentiment
•Fear & Greed indices
•Search trends

Each tier adds context. Tier 1 is the most actionable for short-term trading. Tier 2 helps with execution and timing. Tier 3 is better for longer timeframes. Tier 4 is useful as a contrarian indicator.

You don't need all of it. But you need more than price and volume.

The Democratization of Data

Here's the good news: this data used to be institutional-only. It's not anymore.

In the last few years, data providers have emerged that give retail traders access to much of this information:

•HyBlock Capital - Comprehensive derivatives data, liquidation levels
•Coinglass - Funding rates, OI, liquidations
•Laevitas - Options and derivatives analytics
•Glassnode - On-chain metrics
•Santiment - On-chain and social data

The bad news: quality data isn't free. Professional-grade data costs money—often hundreds of dollars per month.

But here's how to think about it: if you're trading with a $10,000 account, paying $100/month for data that gives you an actual edge costs you 1% monthly. If that data helps you make even slightly better decisions, it pays for itself.

The traders who refuse to pay for data are the same traders who keep losing to those who do.

You Don't Need Everything

I'm not saying you need to subscribe to every data service and build Bloomberg-level infrastructure.

You need to understand what data exists and what it tells you. Then you need access to the specific data that informs your trading approach.

If you're trading short-term derivatives, you need liquidation levels and funding rates. That's non-negotiable.

If you're trading longer timeframes, on-chain flows might matter more than funding rates.

If you're trading altcoins, exchange-specific data and whale tracking become more important.

The point isn't to drown in data. It's to have the right data for your decisions.

The Level 2 Journey

Over the next several lessons, we're going to deep-dive into each major data category:

•Open Interest - Reading the derivatives market
•Funding Rates - The cost of being wrong
•Liquidation Levels - Where prices get pulled
•Order Flow - Seeing the invisible
•Data Sources - Where to get this data
•Building Your Pipeline - How to process and use it

By the end of Level 2, you'll understand what data actually matters, where to get it, and how to interpret it.

You'll still be looking at candlestick charts. But you'll be seeing them with context that most retail traders don't have.

That context is where edge begins.

Key Takeaways

•
You're at the bottom of the information hierarchy. Institutions see far more than candlesticks and volume.
•
Price is the last thing to move. It's the effect, not the cause. Trading price alone means always being late.
•
Derivatives data reveals the future. Liquidation levels, funding rates, and open interest show you what's building before price reacts.
•
Data is increasingly accessible. You can get institutional-grade data as a retail trader. It costs money, but it's available.
•
You don't need everything. Focus on the data that matters for your specific trading approach.

What's Next

In Lesson 2.2, we'll introduce the world of alternative data more broadly—what categories exist, why they're predictive, and how the best traders use them.

Then we'll go deep on each data type, starting with Open Interest in Lesson 2.3. By the end, you'll never look at a chart the same way again.

Continue to Lesson 2.2: Introduction to Alternative Data.